An archive of my writings on the Jamaican economy dating back to 2003 and link to my books "Charting Jamaica's Economic and Social development - A much needed paradigm shift" AND "Achieving Life's Equilibrium - balancing health, wealth, and happiness for optimal living"

Friday, July 25, 2008

For years now, we have known as a country that crime is the most significant factor contributing to the lack of economic growth in Jamaica. And this is not only crime as it relates to murders, robberies, and rape, but includes white-collar crimes such as corrupt activities by public officials. The fact is that crime contributes significantly to the cost of doing business in Jamaica and hence decreases productivity, which is at the heart of our economic challenges.

This effect is even more pronounced now, as the world is caught in a serious downturn in economic activity. Because of this, the region as a whole is expected to experience negative impacts to tourism and remittances, the mainstay of Caribbean economies. The IMF has reported that world economic growth is expected to decrease from five per cent in 2007 to 4.1 per cent in 2008 and 3.9per cent in 2009. The Latin America and Caribbean (LAC) region has not been spared, and growth is expected to slow from 5.6 per cent in 2007 to 4.4 per cent in 2008 and 3.6 per cent in 2007.

Poor regional performanceSo, the numbers show that the LAC region is expected to decline at a faster rate than total global growth. My view is that this is explained by the fact that Caribbean economies' main foreign exchange earners (tourism and remittances) are discretionary income types, and so the expected slowdown in consumer demand, and reduction in discretionary disposable incomes, will have a greater effect on the Caribbean. The exception, of course, being Trinidad that produces oil.

A March 2007 report by the UN/World Bank entitled "Crime, Violence, and Development: Trends, Costs, and Policy Options in the Caribbean", reveals that crime robs the region of a significant amount of growth. Murders per 100,000 population annually at 30, is the highest in the world when compared to other regions. It also states specifically that if Dominica, Guyana, Haiti, and Jamaica were to reduce their annual homicide rates to Costa Rica's level they could add 1.8 per cent, 1.7, 5.4, and 5.4 per cent respectively to their annual growth rates. In the case of Jamaica, this comes against the background of a 2003 study which found that crime costs the country 3.7 per cent of annual economic growth.

So, because we have failed to act for so long, the cost of crime has continued to increase. This is evident in the last business confidence survey, which shows that less business persons are inclined to put new investments in Jamaica. No doubt, all the evidence points to crime as the number one problem in Jamaica today.

The question then is, how can we deal with this problem? All we have been doing over the years is just talking and putting in place the same old policies over and over again. Whenever we have an upsurge in crime, we tend to put in place 'tough' measures to fight the monster. This always elicits the same response from human rights groups and the police go out and crack a few skulls while their actions contribute even more to the increasing levels of crime, because what they do creates enemies instead of deterring crime. In fact, the same UN/World Bank report states: "An important finding. is that in Jamaica a lower percentage of crimes are reported to the police in areas with higher crime rates. The reporting rate can plausibly be interpreted as a measure of confidence in the police, as people will be more likely to report when they trust the police and believe they will respond. Lack of trust and confidence in the police is then lower in areas with higher local crime rates."

Chasing the wrong issuesThis, in my view, is at the heart of the crime problem we face. And so, when the media continues to focus on the measures announced by the prime minister, this is another example of how way off track we always are in what we need to focus on. The prime minister has announced extended detention measures (when properly approved) and mandatory prison sentences for certain crimes, amongst other measures. As far as I am concerned, extended detention has always been practised unlawfully by the police and some have always imposed their own sentences on citizens without a trial. The announcements by the prime minister will not, in my view ,further erode the rights of Jamaicans as they have always been subject to the whims and fancies of the police. In fact, if the appropriate controls can be put in place, the measures announced by the prime minister may even improve the conditions.

The important thing to focus on is not the measures announced by the Prime Minister. If these measures can be properly controlled, then the best way to avoid being subject to them is to not commit the crime. This reminds me of when, under the previous government, motor vehicle fines were significantly increased and there were demonstrations against the fines by some taxi drivers. As far as I am concerned, the way to avoid the fines is to stick within the rules.

If we are to seriously deal with the crime problem then it is not enough to give greater powers to the security forces, which are needed in the short term to address the crime crisis. Giving the police additional tools is like giving the carpenter a saw and hammer to make a table. If the carpenter is not competent, then despite all the high tech tools he may be provided with, the table will still not be made properly. And so we need to go beyond the measures announced by the prime minister and address penalties for police corruption; how we intend to build trust in the police force; and what immediate improvements are to be made to the justice system.The fact is that no new powers for the security forces can work without people trusting the police, and feeling comfortable giving them information. If people feel that the police are their enemies then they will never come forward with information. We also must remember that justice delayed is justice denied, and prolonged court cases while the legal fraternity argues about who are hustlers and who are not is just not cutting it. And very importantly, we must double the penalty for public officials involved in corrupt practices. It is only after we address these issues that any measures we implement will work.

The fact is that, as a country we cannot afford to continue the high levels of crime that have haunted us for far too long. The effect has been compounded by world economic events, as rising energy and food prices mean that businesses are less competitive and real disposable income levels have decreased. But as we seek to solve the crime monster, let us not lose focus of what the real issues are.

Friday, July 18, 2008

The next six to nine months will be one of, if not the most challenging, in the economic history of independent Jamaica. And I say independent Jamaica merely because I am not aware of what the economic circumstances were before. In fact what is brewing I would call a Perfect Economic Storm.

I say this not just because bad management of the economy over the years is finally coming home to roost, but also because the vicious global environment will play havoc on vulnerable economies such as ours. The reason for our vulnerability is because we have allowed ourselves to be destroyed by the virtues of consumerism, corruption, crime, and political rather than economic decisions. In fact the infrastructure that would make our economy able to weather the current global shocks does not exist because we have failed to educate our people and insist on productivity.

The makings of a stormSo what we have is an economy where productivity is declining each year, or is flat at best; the people are uneducated compared to our trading partners; capital infrastructure is low compared to our trading partners; economic growth is highly dependent on imports; and the cost of business is artificially inflated because of crimes such as extortion. Combine all of this lack of proper infrastructure with the lack of proper leadership in both the private and public sectors and what you have is an economy that is not able to protect itself from any unfavourable external shocks.

But what are some of the shocks we face that will make for this perfect economic storm, against this background of a vulnerable economy. They are:- The rising oil prices have caused us to shell out more than an additional US$1 billion per year, when exports are not growing near fast enough to close the increasing trade gap. And because we have destroyed the mass transit infrastructure then people have no choice but to drive their personal cars, and so we cannot adapt to rising oil prices as quickly as developed countries such as the US. With all of this even if oil pulls back in the short term, the long term prospects is indicating it will continue to rise;- Rising food prices is causing havoc on consumer spending and may start to impact general nutritional levels. If this happens we could then see a negative impact on health costs in the near future. Food prices should continue to rise in the foreseeable future. Add to this the fact that our agriculture is plagued by unproductivity, praedial larceny, and a high import content and it makes the situation seem grim;- The government does not have the fiscal space this year to divert resources into much needed social programmes. It is going to be very important this year that the fiscal target is met, not just because we have been missing it for years, but also as a result of the changed international financial environment which means that we will be punished if we miss it;- Crime, and lawlessness, continues to plague the country. Because of the social degradation and the lack of proper enforcement of discipline in the society over the years corruption and lawlessness have become ingrained. This single factor has been the main reason for the underperformance we have seen in tourism and domestic investment when compared to the rest of the region;- Probably one of the most important turn of events over the last 2 months has been the significant downturn in business confidence. What this means is that we can expect to see stagnated economic activity in the near future, if conditions remain the same;-The worsening economic situations in the US, Canada, UK, and Europe (our main trading partners internationally) will impact negatively on tourism, remittances, and other export earnings. We may see some growth in some of these areas but the growth will not be enough to counter the inflationary effects of our imports. Europe and the US also seems to already be in a recession; and- The failure of the “alternative investment schemes” will have a negative impact on consumer spending and personal loan portfolios of the banks, thus affecting their profitability, as they have spent the last three years pushing consumer credit. The impact on the financial system overall will be minimal if any though. This could in turn negatively impact the motor vehicle and housing industries and is the result of not having dealt with these schemes three years ago when at the time I was emphasizing the importance of regulating them and I was being told that I was marketing for them. The fact is that pushing for them to be regulated would have shaken out the illegitimate ones very early and prevented the potential impact it will have now. Instead we chose to get public opinion against us with the big stick approach.

All these factors had the seeds planted years ago, even the global events. What is happening now is that all these seeds have developed into trees ready to bear fruit. The fact that when global economic conditions were excellent we failed to take advantage of it adds to our woes today. When all these events come together in the very near future, as they will, you will have the making of a perfect economic storm. And if we were to even have flooding this hurricane season it will compound the effect.

Competence neededBut like all storms the ship can be guided through, even in one as furious as this one. What it is going to require is competent and fair leadership. Most importantly it is going to require superb leadership by the Prime Minister, as he is the captain and the ship is fully in his control. But it does not stop there; it is going to be very important to have in place competent, and not just name brand, persons strategically placed to lead important areas. If this is compromised then the ship can easily sink. I would even go as far as to recommend that an economic council of some sorts be established to help guide us through what is on the horizon, made up of “competent” persons from the opposition, private sector, public sector, and government. These persons should be paid, and so held responsible, but more importantly should be competent.

What I am saying is that there is hope, as the inefficiencies in (i) oil consumption patterns; (ii) agricultural production methods; (iii) consumerism; and (iv) bureaucracy, all leave us with significant space for improvement, and is therefore an opportunity. But it is important that we act decisively on improving these areas, in addition to enforcing discipline, if we are to sail through these troubled economic waters.

As an example, when oil was at near US$80/bbl last year I remember blowing the trumpet with Ralston Hyman about the necessity of dealing with the short term demand as a matter of urgency. When such a situation occurs it is necessary that the slow wheels of government bureaucracy do not stand in the way, as our inability to be proactive is part of the reason for where we are today. In the US for example, as large as their bureaucracy is they are able to make quick decisions when it comes to the economy.

In conclusion although the future looks tough, we do have the ability to go through it with minimal damage. This, however, is going to require strong leadership to do what is necessary to carry us through. I have said in the past, and will say again, that I am of the firm view that the Prime Minister is capable of doing that, and it is important that whatever space we occupy that we support him in doing so.

Friday, July 04, 2008

I have always said the main problem I have with previous administrations is not the way they have managed the economy, but the breakdown of law, order, and discipline. Jamaica's problems with violent crimes did not start today. The fact that people were allowed to get away with small infractions has led to the major crimes we face today.The indiscipline on the roads, the corruption by public officials (described as runnings), the blaring music at nights, and the general "Jamaica no problem" attitude. These have all resulted in Jamaica being one of the most murderous countries in the world. It is the inaction of our leaders who have been honoured with so many accolades, that has caused us to be where we are today. Leadership both in the public and private sector. This is what has caused the assassination of someone I have known for over 20 years, Douglas Chambers.

A sad day for JamaicaIt is a very sad day for our country when someone with all the intentions to make this country better is slain. For it is saying to us that if you try to do anything to improve Jamaica, and help to improve the lives of Jamaicans, then you will not make it. It is very symbolic of the way our leaders have approached this country, that is, Jamaica is a place to be plundered, not developed. In other words the tradition of Henry Morgan, the pirate, must be continued. When there is nothing else to plunder, and Jamaicans have killed off each other, then the same persons that have led us to this sorry state of affairs will move on to another country and retire in comfort.

Douglas' death was not orchestrated this year. If we are honest with ourselves it all started in the 1960s, after independence, when political violence started to rear its ugly head. At the time there were no high-powered weapons, which cause the gruesome slayings today. But we have always sought to use the best technology available to create bodily harm. This technology improved to what it is today, not because the poor man hired to commit the crime could afford to bring in the guns. He was too busy trying to find food for himself and his many children. Rather it was the "Honourable" politician, isolated behind security, that used the poor Jamaican like a rag cloth to wipe out what he considered dirt.

So, irrespective of what anyone might think about Douglas' style, his intention was always to clean up the corruption that is the legacy left to my generation, and the ones following, by those who have fought their way to power with the blood of the poor, plundered our coffers, and retired to a life of plenty. The Jamaica today is the legacy that has been left for us by some of the leaders we have bestowed with the title Honourable and many other awards. As I see what this legacy has done to Douglas, I ask, what is honourable about the Jamaica that has been created?

The legacy left by the generations before us is aptly described by Douglas' circumstances. He was given $1 a year and bullets. In other words, the legacy left by previous generations for us is poverty and crime. That is what is meant by $1 per year and bullets. Should we be thanking those who have gone before us for the legacy created, or should we be saying to them, "You have failed in the leadership of this country. It is time that you stop giving solutions to something you could not do when you were asked to by the people and allow us to do it". There is nothing I hate more than to hear those responsible for where we are now speak about what the solutions are to the problems we have today.

Jamaica as an experimentIt is as if Jamaica was nothing more than a lab rat to be tortured and poked in an experiment to prove a theory of the resilience of Jamaicans to "sufferation". Because no real attempt has ever been made to truly improve the lives of Jamaicans. So I find it very difficult to reconcile the fact that we have $1 Trillion in debt burdening the poor people of this country, while the old lady I saw walking on the sidewalk a few weeks ago (in bright sunshine) had to step off into the road to avoid a puddle of water. I find it very difficult to reconcile how we have supported public sector companies losing billions per year when the children line the streets hustling with no hope of a proper education or any health care. I find it very difficult to reconcile how we spend billions on hosting a cricket tournament for a few weeks when at the same time the police, teachers, and nurses are crying out for more resources.

And then when these questions are raised, some have the audacity to try and defend it. It is not only corruption that has helped to destroy this country, but the wanton way in which we have approached public expenditure in this country. We have spent money not to ensure the development of Jamaica, and Jamaicans, but to ensure that political parties hold on to power. And we may say that it is the people who decide who is put into government. But what we have been doing is keeping the people hungry and ignorant so that if we give them a plate of curry goat and a beer, then they will give away their lives. If our leaders had any respect for Jamaicans they would never entertain that sort of politicking.

The trigger of the gun that killed Douglas may have been pulled by a poor Jamaican man. But it was the mismanagement and inaction of our leaders that developed the criminal and gave him the gun. The trigger was not pulled last Friday. It was pulled as far back as 1962 when we gained independence and failed to develop this country to become one where discipline, structure, and development were given top priority. Danville Walker has realised this in his recent address where he said that those evading customs duty are the well-to-do. It is not the poor man who pulls the trigger who evades customs duty. It is not the poor man that is abused by the police who evades income tax.

So when I hear people criticising the government for not giving a long enough time for the tax amnesty I think about how bare-faced criminality is. For those who evade taxation are as criminal as the man who fires the gun. So how can we criticise the "dons" in August Town for calling a peace truce when the white-collar criminals who evade taxes are also calling for an extension on a tax truce? In fact it is the deprivation of the revenue that has resulted in many respects to crime in this country because education, health, and social services cannot be funded. But then again, maybe if that revenue was coming in we would have wasted it on the scandals that have dogged Jamaica for many years.

It is not one or two wayward men who killed Douglas. It is a well-oiled system of corruption, indiscipline, and lawlessness that has been created by years of neglect and dismal leadership. But we must all understand that when violent crimes take place in Jamaica it is a cry for help by poor Jamaicans who have been abused for decades. And we who have the ability to do so must double our resolve to improve this beautiful and blessed country by fighting the corruption and indiscipline that engulf us.

Douglas was one of thousands of Jamaicans who lost their lives in the fight for "scarce benefits and spoils". But he was at the forefront of trying to change a system that stinks of corruption. He was at the forefront of trying to put in place a better life for Jamaicans, who suffer the indignity of travelling the public transportation system while those responsible for its demise drive in air- conditioned gas guzzlers. So even though he may have had his conflicts with the people, he was truly a champion of the people.

So I say to the young people of Jamaica: Even though the legacy left for us is one of "$1 a year and bullets," we must have the resolve to help Jamaica to rise like the Phoenix from the ashes. And when we have our conflicts, as we always will, do the same thing Douglas would do and say "Come, let's go drink a beer and talk bout it". Big up Dougie.